In Its 2013 Annual Report to Shareholders, Hyer Aviation Group

question 132

Essay

In its 2013 annual report to shareholders, Hyer Aviation Group Inc. included the following disclosure:
On October 6, 2012, the company's subsidiary, Pyro Aeroplex, filed suit against Syntex, an unincorporated division of Bright American Corporation, for breach of contract and fraud with regard to the supply of deficient wire rope that is installed as aircraft flight control cables on WD-50 aircraft. The case, filed in the circuit court of Bell County, Arkansas, was brought to trial and on September 20, 2013, a jury returned with a verdict in favor of the company in the amount of $17.5 million. The Court, upon a post-judgment motion filed by Pyro, reduced the judgment to $4.5 million. Pyro has appealed that Order to the Supreme Court of Arkansas. The company believes the appeal is without merit and will continue to pursue final judgment on the Order. The company, pending appeal, has not recorded the $4.5 million favorable judgment.
Required:
What journal entries, if any, has Hyer recorded regarding this contingency? Explain its rationale.